The so called bad beat refunds have become common practice in the fast-growing sports betting industry. They have become a hot topic among the operators and customers alike, as compensating for losing bets often comes with a twist. The practice of awarding free bets instead of straight winnings is dividing the industry.
This marketing tactic has been applied by international bookmakers for an extended period already but only made waves in the United States throughout the last few years. It is up to each of the operators whether or not they want to apply this strategy in order to retain a larger portion of their customers. Some have even changed their stance on using these refunds that may come with negative repercussions.
One of the recent examples of such bad beat refunds happened during the Memorial Tournament in which John Rahm was forced to retire after the third round despite a large lead. The betting favorite was not allowed to finish the competition due to a negative COVID-19 test result. Headlines were made shortly after on June 5, when the biggest American sportsbooks began handing out refunds to anyone who bet on Rahm.
Major sports betting brands such as FanDuel, DraftKings, BetMGM, Caesars/William Hill, and BetRivers “were among those who offered refunds. As a matter of fact, some even granted outright payouts on Rahm given the nature of his exit prior to the final round. Others such as Circa Sports, who had gone down the refund rabbit hole previously, opted to not grant them this time.
At first glance, it doesn’t seem to make much sense for the operators to hand back money to customers when they lose due to controversial circumstances. But the publicity that comes along with it may very well give the brand an exceptional boost and edge over traditional bookmakers in the mainstream media.
Australian sportsbook PointsBet caused a tussle in the US market only a few days after the launch after issuing refunds on a controversial NFC Championship Game back in 2019 as outlined in an ESPN news article. Other competitors were not happy with the proceeding as it would set a precedent by a newcomer in their established market and steal a portion of their share. But the publicity through the ensuing mainstream media certainly lifted PointsBet to new heights and paid for itself.
Typically, the refund is not available as straight cash but credit with the operator instead. That can be used to place free bets, which in return may warrant responsible gambling concerns. Customers can now place further bets than usual and this may trigger addictions, which authorities in regulated US states want to prevent.
It can most certainly be considered as an invitation to gamble more. The fact that most refunds have strings attached and cannot be used as cash funds are another red flag as well.
Determining which losing bets deserve a refund is solely up to the sports betting operators and that can create a sense of unease with the customers as well. On paper, nobody would have any reason to be upset to essentially freeroll the next bet after losing the last one. But the different treatment of such situations may very well have the potential to upset them.
A lot of the backlash can also be contributed to professional sports bettors, who know the drill already and have accepted negative outcomes as part of the business. They have learned valuable lessons in the industry the hard way and consider refunds as bad practice to lure in recreational bettors.
In Europe, refunds have been common practice for many years. Some operators such as Irish giant PaddyPower have even used early payouts “during live sports matches on a consistent basis. When the bookmakers get it wrong and have to eat the losses, the customers typically don’t mind because they have the cash in hand straight to their accounts.
Whether or not this default principle will also be applied in legal US sports betting remains to be seen. But bad beat or justice refunds, how they are commonly known, have become a part of the industry for sure.